Scholarship Award Displacement occurs when a college reduces a student's institutional aid, such as grants or scholarships awarded by the university, after the student receives an outside scholarship from a source other than the college, state, or federal government.
Why It Happens
- Over-awarding: A student receives more financial aid than the school's cost of attendance or their demonstrated need. Federal regulations guide institutions on how to handle over awards, often by first reducing certain institutional aid or loans.
- College-specific policies: Each college has its own policy for handling outside scholarships, and some may reduce institutional aid while others prioritize reducing loans first.
- Limited institutional resources: Colleges may have limited funds and use outside scholarships to reallocate money to help more students.
How It Affects Students
- Little or no actual financial gain: Students may not benefit financially, as the outside scholarship can simply replace a grant they would have received from the college. This leads to no net gain to fill the unmet need for students that qualify for need-based aid.
- Undermines or invalidates donor intent: It goes against the intent of many private donors who want their scholarships to reduce a student's debt or work burden.
- Can negatively impact graduation or graduate school plans: Students who graduate with less debt are more likely to attend graduate school. Displacement, particularly when it leads to higher loan amounts, can discourage students from completing their undergraduate studies and in some cases from pursuing further education.
How To Avoid It
- Check college policies: Before accepting an outside scholarship, research your college's specific policy on outside scholarship displacement. The best policies let scholarships replace unmet need and student loans instead of reducing grants. This will reduce the net price, which is the cost of attendance (COA) minus grants and scholarships.
- Talk to financial aid officers: Discuss the potential for displacement with your college's financial aid office. Try to appeal to the financial aid officer to increase the student's COA if there are costs that can justify an increase.
- Discuss with scholarship providers: Ask the scholarship provider if they offer flexible options, such as contributing directly to a 529 plan to help avoid displacement.
- Advocate for change: Some states, like California, Maryland, Pennsylvania, and Washington have laws preventing displacement in most cases. You can advocate for similar legislation in your area.
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